Leasing Vs. Buying Solar

Understanding the difference between leasing and buying solar panels

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What’s the difference between buying solar panels with a loan and leasing them? If you’re wondering what’s the best option for you, you’ve come to the right place. Let’s go through what you need to know about buying vs. leasing solar panels.

Is it better to buy or lease solar panels?

There are three ways to purchase solar panels: cash, solar loans and solar leasing, otherwise known as a power purchase agreement (PPA). The best way for you to enjoy the benefits of clean, renewable energy depends on your particular needs and financial goals.

Here is a quick overview of leasing vs. buying solar panels:

The financial benefits of buying a home solar energy system with full cash upfront include:

  • Higher long-term savings for homeowners.
  • Monthly energy bill savings from the first month, with no monthly payment to offset the savings.

The benefits of financing your solar panels with a loan include:

  • Low upfront cost depending on type of loan (could be zero upfront in some cases).
  • Significant long-term savings.
  • Monthly utility bill savings, offset by a monthly loan payment.
  • Loan payment will get paid down and eventually disappear.

The benefits of solar leasing or solar purchase agreements (PPA) include:

  • Lower upfront cost than purchasing with cash.
  • Maintenance for the solar system will be the responsibility of the leasing company.
  • Monthly electricity bill savings but a higher monthly payment for lease that will offset the savings.

What are the pros and cons of leasing vs. buying solar panels?

Let’s go through some of the pros and cons of leasing solar panels compared to purchasing solar panels with a loan. Make sure you talk to a qualified solar professional to find out what makes sense for your particular situation.

Monthly payments

Leasing solar panels means you acquire a solar lease or PPA. Some may be $0 down and some may require money down. This will determine your monthly cost.

Compared to a solar loan, the savings may be less. This is because solar loans are typically paid down after a certain number of years, resulting in lowered monthly payments, and will eventually be paid off.

Maintenance and repairs

Leasing solar panels is only right for you if you want minimal responsibility for the solar panels installed. The owner of the solar panels (typically the solar leasing companies or installers) will send out a crew for maintenance or if anything needs to be fixed.

Compared to purchasing your solar panels, this could seem like a benefit. However, if you make sure to choose a solar provider with warranties on service and products for the life of your panels and loan, you won’t have to worry. Solar panels also require very minimal maintenance.

Selling your home

Leasing solar panels means that you do not own them. This means if you decide to move, you will have to contact the solar company to negotiate purchasing the lease or transferring to the new owner.

In comparison, with a solar loan your home will likely sell for more and faster, according to studies. And since you’ll receive a higher amount for your home, you could even recover the amount of the loan.

Solar incentives

Depending on your state, you’ll be eligible for solar rebates, incentives or state tax incentives if you purchase your solar power system instead of leasing it. In addition, the federal government hands out the best solar incentive: the solar federal investment tax credit (ITC) which is currently 30% through the end of 2032*. This federal tax credit will go to the owner of the system, which is more reason to purchase your solar system instead of leasing.1

Why shouldn’t you lease solar panels? The answer depends on your motivation for owning the system, but overall buying a system is a much better option in most cases. If you’re looking for lower electric bills and want to eventually produce free energy for your home, buying solar panels can be a great investment.

How leasing vs. buying solar panels affects selling your home

One of the things to consider when deciding whether to lease or buy your solar panel system is whether you want to sell your home within the lifetime of your loan or leasing agreement.

Moving a solar system from your home is costly and not a great idea, especially since solar panels increase the value of your home, leading to a higher selling price as well as less time on the market.

In fact, there is research out there on it.

  • Potential buyers are willing to pay an extra $12,000 to $15,000 for a home with just an average sized solar array, more with a larger array.
  • Each additional $1 in utility bill savings from your solar installation can add a whopping $20 to your home value.
  • Homes with solar arrays sold 20% faster and for 17% more.

This means that having solar panels installed on your home is a great idea, but if you’re considering moving, you’ll have to take that into account when deciding between leasing or buying your system. In this case, buying your system with cash or with a loan is possibly a better investment.(1)

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Sources

1. https://www.ecowatch.com/solar/solar-leasing